Creating A Business Plan: Taking the Offense Against Competition

by Terry L. Bryan

Having trained in the martial arts for over 36 years, I have seen a lot
of changes. Like all things, the arts tend to follow trends based on what
is popular, but one element that has drastically impacted traditional
karate is how to run it as a business. Within any group of martial artists,
you will find those that advocate using proper business tactics to be
successful, those that think commercialization of the martial arts is
the worst thing that has ever happened; and all those in between. In order
to put things in perspective, if you are teaching students, whether it
is at a local recreation center, in your own home, or at a 10,000 square
foot space that you lease, you are in business. True, your costs are lower
if you are doing it in your basement, but the time, energy and risk are
pretty much the same as for someone running a big business. If someone
gets hurt in training, you stand the same chance of being sued as the
big commercial outfit.

I have always been amazed at how a karate-ka, or other martial artist,
will spend hours upon hours thinking in detail about potential self-defense
scenarios, but not think twice about opening a martial arts school without
even as much as doing a business plan. Jim Mather (who runs the International
Martial Arts Management System) once stated, "If your school had
to close down today, would your community be better off or worse off?"
If the answer is better off, then you should do the community a service
and go ahead and close it down. If the answer is worse off, then you have
an obligation to do everything to ensure that does not happen.

The martial arts are growing at a rapid rate, and the need for quality
instructors is growing with it. If quality instructors don't grow with
the times and learn to survive, that need will be filled with lesser quality
instructors with an end result of a tremendous loss in quality, which
we are already seeing. According to Gary Gabblehouse (FightingArts.com's
Research Coordinator) whose company, Fairfield Research, Inc., conducted
a national telephone survey of 1,002 adult heads of household, there are
currently 2.64 million adults regularly training in the martial arts along
with 3.02 million youths, under the age of 18. When asked about the coming
year, respondents' intentions to start training martial arts would see
a 14 percent increase in martial arts enrollment -- bringing the practicing
martial arts population to 6.45 million practitioners. This tremendous
growth is due to the awareness of all the benefits that traditional martial
arts have to offer.

In order to understand the marketability of the martial arts, you must
understand that what you are teaching is not just how to fight. You also
must start looking at how and what you teach as it will benefit your customers.
What really matters is what is in it for them. And you'll see that just
teaching self-defense or how to beat people up will hold little value
to most people. However, if you realize that what you're teaching is self
confidence - self esteem - physical fitness - ways to reduce stress- improve
grades - respect - self discipline and so forth, then you will recognize
these are valuable commodities in our society.

I think that most traditional karate and other martial arts people have
gotten to the point where they've seen other schools start using business
techniques and business ideology, and have watched them become very successful.
Their immediate reaction, like mine was for years, was to say "But
I will teach the true karate! I will never lower my standards! They're
doing this because they are bastardizing the Art!" I think you must
realize that you have an obligation to your style and to your community
to teach good karate, or any other martial art. If you don't allow the
good karate, or other art to grow and prosper within your community, then
the other people will come in and take over the market. If you really
believe what you have is a benefit to your community, then it's up to
you to promote yourself and your school. As a teacher of traditional martial
arts it is up to you to figure out the most effective way to recruit students
and inform the community of your professionalism. This will ensure that
your style will prosper and grow within your local community.

Right now there are some enormous changes taking place in the martial
arts industry. Forty years ago, every town had a mom and pop drugstore.
They made milk shakes and they sold pharmaceuticals and old recipes. You
could get your hamburger and fries there. Most of those are gone today.
What happened was the emergence of the big chain stores who got together
and took over the industry. Now, let me tell you about a similar situation
that is happening in our industry right now. Bally's Swim and Fitness
clubs just came into the Martial Arts industry. They've bought approximately
14 schools on the East Coast. The American Taekwondo Association predicts
that they will have one thousand schools across the country by the end
of this year. It seems like every month I hear of another traditional
school having to close its doors because it couldn't keep up with the
competition down the street. This is a travesty, and if you are fighting
to survive, you need to turn the tide and fight back.

The only way you are going to survive in the next 10-15 years is to get
busy and begin increasing your business and technical knowledge of the
martial arts. You should make it your aim to double your knowledge in
these areas every 5 years to keep up with current ideas. In order to make
this a reality, I have joined forces with others in the industry to try
to teach fundamental business techniques to help these martial arts schools
survive and prosper and to take back the market share they have given
up to other schools and markets.

The first and most important thing you can do is create a clearly defined
and written business plan. Think it through and put it in writing! This
article attempts to give you some of the basic elements and information
to help you begin your own business plan. Topics include demographics
and target market, corporate image, student value, mission statement,
price, and location.

Demographics and Target Market

In today's world, there are many good resource materials on how to develop
a business plan. Although we have business plans ready for you to obtain
and follow as a guide, I encourage each of you to sit down and evaluate
your business plan on a quarterly basis. If you are a new school, your
business plan will be different from a mature school that has been in
business for a long time. However, the fundamental point is this: If you
don't plan then you're bound not to get there. You must figure out where
you are going, set intermediate and long term goals and work toward them.
If you are happy just keeping your doors open, if you are planning on
just paying your rent on a month to month basis, then you may not need
a business plan. However, you may not need to be in business either, and
your future doesn't look very bright in reflection to what is happening
in the industry today.

"The best fishing techniques in the world won't do any good if you're
fishing in a pond that has no fish!"

Evaluating the demographics of your area

By studying demographics you can find out where the potential customers
are and where you need to put your karate school. After that the work
begins! When I was in Vietnam we practiced a specialty of setting up an
ambush. We made a point of knowing our enemy and their route of travel.
We then would pick the best spot to sit and wait, thus ambushing the enemy
as they came by. They, likewise, did this to us. In business, you will
identify not the enemy but your target market or target group or the people
who would be potential students. In the karate business today, for example,
your target market is usually kids ages 4 - 14 years old and adults. This
accounts for 70 - 80% of the people studying in Martial Arts today! We
have just developed a program where we are teaching accredited programs
in the high schools to reach the teenage market, but for most of you,
marketing to kids and their parents will be the best approach. So, when
you're looking at who will spend money on karate lessons, it's usually
parents of middle income with kids in this age group.

Taking a defensive posture in karate, or a defensive posture on holding
your ground, your ideal position is with your back to the wall with only
one area of entrance to easily guard against your enemy. But when you're
trying to get customers to come to you, it is ideal to be in a position
where they can come in from all angles around your school.

Where to find your demographics

Your local library has demographic information that you can use to scout
for a potential good location for your school. In suburban areas the majority
of students travel 2-3 miles so look within that radius. Once you have
collected your demographic information you can pinpoint the ideal location
for your school. If you have an existing martial arts school and now realize,
after your research, that you are in a bad demographic area, don't think
you need to close down and move immediately. What I am saying is do some
planning before opening up a new school. Put out some scouts and discover
your ideal spot for opening a school.

Corporate Image

You know the times are changing when you hear other instructors speak
of the Corporate Image for a karate or other martial arts school! But
today, in order to survive, you must have a professional image. The image
of your dojo, or martial arts school, should be spotlessly clean, very
professional and with nice furniture. If you still have an old beat up
location that has holes in the walls and is dirty and smelly, you are
not going to attract the type of clientele from which you are going to
grow a successful school. We encourage our owners to dress up their martial
arts school much like a doctor's or lawyer's office, looking professional
and clean.

Your school logo

A good logo is worth a thousand words. I was at a seminar not long ago
where they showed a praying mantis on the screen. I instantly knew that
as the symbol for Tong Long Kung Fu, the Praying Mantis Kung Fu. However,
they researched 100 people who had no Martial Arts background, and found
these people believed it to be the logo for an exterminator service! When
you consider a logo for your school you need to determine the image you
are trying to project. Your corporate image should portray your school
as a place of whole-some activity for the entire family. Here are some
key points to consider. Safety is our number one concern in karate, and
the at-tributes of your logo should indicate that training at your school
is safe as well. Gaining self-confidence and physical fitness can be obtained
through your instruction, and it is a great place to hang out for the
whole family. If you are running a karate dojo and still project the image
that only true warriors train at your school, then you will never be successful
in creating a corporate image that will attract the most students.

Mission Statement

Even though you may operate a martial arts school, your business may
take on various emphases. Many karate school owners, for example, start
off as a full service karate school, concentrating on teaching self-defense.
They may teach weapons or tournament competition and end up being a tournament
school. Someone else, on the other hand, may provide videos, books or
magazines for their students and end up doing 50% of their business on
supplies or merchandise sales. What business are you in, or would you
like to be in now? You need to define what business you are going to be
in, because you don't want your literature and handouts to be saying one
thing while you are doing something else. If you are planning on expanding
to 3, 4 or 5 schools, you need to include that into your business plan.

Corporate image is a major key as you set out and take back some of the
market in your area. Your corporate image should be a reflection of your
mission statement. With this statement you will identify your mission
and purpose for operating a martial arts school. Is it strictly just to
make money? Is it to help your community? Is it to create an atmosphere
for learning and educating the people about traditional karate or other
martial art? Are you trying to help your children learn how to set goals
or to grow as individuals and become leaders among their peers'? These
are the types of questions to ask yourself as you determine the message
you want to convey through your mission statement. Once you identify the
goal or combination of the goals as discussed above, then you can sit
down and design your mission statement. This will be used by you and your
staff to understand what your mission is at the school.

Student Value

Estimate the amount of money you expect from each student over the course
of a year. Several elements beyond monthly tuition go into this estimate.
First begin by adding up the tuition for a 12-month period of time per
student. Next consider a registration or sign-up fee ranging from $60
- $80 for most schools. Also include seminars and tournaments, one about
every month, again generating another $25 to $30 every couple of months
per student. Belt testing fees are also included in most organizations
with students testing every six to eight weeks for a new belt. Remember,
frequent promotions for smaller steps help students see that their accomplishments
are getting them somewhere. Finally, equipment purchases average around
$200 a year per student. Add up all these elements to figure what your
total student value is for a year. Multiply this times 100 or 200 students
according to your school size and your total will be the gross you should
receive for the end of the year.

Charging the Right Price

This is tough for most traditional martial arts schools. My current fee
structure charges $85.00 per month for unlimited group classes per week.
Private lessons run $50 -$100 per hour. I'm probably at the top of the
market, and that's where I want to be. I'm located in Colorado Springs,
Colorado - home of the Olympic Training Center. I'm one of only a few
traditional karate schools in this town at this time, and I want everyone
to know that they must pay extra for good quality instruction.

I know at this time there are a lot of you charging $25, $30 or $40 per
month. And we'll simply tell you that you are probably charging too little.

I once heard a successful school owner say, "I don't mind my competitors
charging less; they know what they're worth." There's a perceived
value in just about anything. If you see two pairs of pants, one that
is $20 and the other that is $140, you're going to perceive the higher
priced pair as a better quality. That's the American way of looking at
things. So if you're charging very little, you're going to be perceived
in your community as being of little value. We are all aware of the high
fees plumbers and attorneys charge. They know what the value of their
services is. How much are you worth? What's your time worth? You need
to figure out what you need to charge to pay yourself what your worth.
There is no reason why Martial Artists, who have dedicated 20 to 30 years
of their time into what they love the most, can not get paid equitably
with plumbers and attorneys. If you are not making $30,000 to $100,000
a year teaching karate, or your martial art, then you aren't charging
enough. I encourage each of you to go and price what skating, piano and
dance lessons cost.

I also encourage you to examine your pay structure. Look at your student
base, and then figure out what your monthly or annual income would be,
of course if you have existing students, if you are not going to double
their payments immediately. You will need to slowly increase their prices.
The point is that people won't object to paying fair market value for
the service you will be providing for them. That value right now, across
the country is between 60 and 80 dollars per month. For those who are
selling black belt programs, or training all the way to black belt, it's
running between $3,000 and $4,000. For this contract amount they will
receive training all the way to the rank of black belt. Now, you may ask,
why do you do that? Well, it is front loading your program. We find that
there is at least a 50% drop out rate (some schools reporting up to 80%)
below the rank of black belt, no matter how innovative and exciting your
classes are. This has been successful for many school owners, but I would
caution you to cash out only a very small percentage of these contracts
and don't spend any of that money until you have earned it. We currently
charge a month-to-month tuition for everyone or they pay for a year at
a time, except for high school programs, which pay by the semester. You
must maintain a cash flow to cover all bills before ever cashing out any
contracts and then put that money away!

Location

Nowadays, location is more important than ever. More and more you will
find a busy highway is probably not the best way to go. Some-where with
high visibility is a key place to set up a karate or other martial arts
location. Besides demographics, picking a location with good visibility
is crucial. For example, by being stationed in a shopping center next
to a major grocery store, people will be attracted to just walk into your
school. The amount of income from being in a prime location will usually
make up for the higher rent you'll have to pay for being located in a
strip mall.

Placing a karate or other martial arts school in neighborhoods with many
families has been very successful for most people. Locating a martial
arts school downtown where students have to drive through busy traffic
can be a drawback. I try to position myself within walking distance for
many children and therefore have large student bases that actually walk
to the school. If you find a location in a residential area with lots
of children and families that can support extra activities, you're probably
going to have a great school. (I now have several programs in the high
schools for PE credit and then we have after school programs in those
areas as well.) With one main dojo, we now cover the entire town through
our outreach school programs.

I hope this information will be useful as you rework your current business
plan or begin to write one for the first time.

About the Author:

Terry Bryan is the former General Secretary for the USA-NKF (National
Karate Federation), the official governing body for the sport of karate
with the US Olympic Committee. He currently is the Executive Director
for the American Black Belt Academy, a 501c3 non-profit organization located
in Colorado Springs.